Hundreds of Millions in Katrina Funds Still Unspent

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Five years after Hurricane Katrina destroyed more than 200,000 Louisiana families’ homes, a state program helping them rebuild still hasn’t paid out more than three-quarters of a billion dollars and has been found racially discriminatory by a federal judge.

Updated at 5:00 PM CDT on Friday, Aug 20, 2010

NEW ORLEANS - Five years after Hurricane Katrina destroyed more than 200,000 Louisiana homes, the state program established to help families rebuild still hasn’t paid out more than three-quarters of a billion dollars and has come under fire from a federal judge for discriminating against black homeowners.

The Road Home program, which state officials developed in July 2006 to funnel grants of up to $150,000 to Louisianans whose homes were destroyed or damaged by huricanes Katrina and Rita in August and September 2005, has disbursed about $8.6 billion to about 127,000 families.

But officials of the Louisiana Office of Community Development acknowledged this week that more than $777 million remained in the fund as the fifth anniversary of the devastating storms approaches. That money should be going in direct payouts to about 3,000 eligible families and to help cover other recovery costs.

The unallocated Road Home funds have sat around for so long that they’ve outlived the state agency that initially ran the program. Road Home is on its second parent after the Community Development Office’s Disaster Recovery Unit assumed oversight when the Louisiana Recovery Authority — which oversaw rebuilding from the hurricanes — went out of business at the end of June, as planned by legislators in the wake of the storms.

“We’re sitting on almost $800 million in homeowner money that’s not been expended. Is that right?” state Rep. Neil Abramson, a Democrat from New Orleans, disbelievingly asked at a meeting Tuesday night of the Legislature’s Hurricane Recovery Committee, which was packed with angry residents.

“They don’t have no staff,” said one of them, Malcolm Russell. “You call, you can’t get nobody. You can’t get the right answers.”

Patricia Hebert, another frustrated homeowner, said she sent in her application more than a year ago, but “I haven’t heard from anybody since.”

“I sent that letter June 23, 2009,” said Herbert, who said a Road Home agent “looked for it in the computer and said, ‘We don’t have that.’

Judge finds program discriminatory
Robin Keegan, who ran the Louisiana Recovery Authority and is now executive director of the Disaster Recovery Unit, said much of the money remains undistributed because of paperwork issues.

“One of the things we’ve done is brought on legal services into our program in order to help those families having succession issues who need to transfer their title,” Keegan said.

But John Payton, president of the NAACP Legal Defense and Educational Fund, or LDF, said the backlog was also due to a racially discriminatory funding formula used by state officials — a position with which a federal judge agreed Monday.

U.S. District Judge Henry Kennedy ordered state officials to stop using the formula, which calculated payouts using one of two criteria: the pre-storm value of the home or the cost of repairs, whichever is lower.

Kennedy found that those choices disproportionately used the pre-storm value when dealing with families from predominantly black neighborhoods while preferring the repair value for families in more affluent, majority-white neighborhoods.

That meant black homeowners’ grants were significantly more likely to be inadequate because home values in those neighborhoods were depressed by historical racial housing patterns — leading to a “strong inference” of racial discrimination, Kennedy said.

The judge rejected a motion by the LDF and other activist groups to recalculate all previous payments using the disputed formula, saying the state had immunity against such “mass tort claims.”

The ruling is largely symbolic, because more than 90 percent of the funds have already been paid out. That may be why it drew little attention this week, but Payton said it was still an “indictment” of the program and said he hoped it was “the first step in truly getting folks on the road home.”

Road Home officials said they planned to close all pending files by the end of this year.

Full payout was never guaranteed, director saysState officials said the unspent $777 million breaks down this way:

$285 million in direct grants to homeowners.

$195 million in “individual mitigation measures,” which cover safety upgrades like shutter and door repairs.

$94 million for property maintenance and demolition of unlivable homes bought outright by the state.

$5 million in contaminated drywall assistance.

$41 million in administrative costs.

$156 million in blight remediation and other unspecified “unmet needs.”

Keegan defended Road Home against criticism from residents who believed they had not gotten their fair share, telling the legislative committee that $150,000 was the cap on individual payments, not a promise.

“A lot of the people I’m talking to are telling me they were supposed to receive $150,000. That is not the case,” Keegan said. “We did not receive enough money as a state to recover from the full event. There was never a guarantee every homeowner would get $150,000.”

In fact, the Recovery Authority said, the average payout is $64,000.

Most of the unallocated money comes from $3 billion in federal funds Congress appropriated in 2008 for Road Home. Members of the Hurricane Recovery Committee have criticized the pace of payouts and say they want to redirect most of that money for other uses.

Last month, Sen. Mary Landrieu, D-La., successfully blocked a House measure that would have stripped $400 million from the federal contribution so state officials could use it for other hurricane-recovery programs, such as land-use planning and floodplain mapping.